Madras High Court
India Sugars And Renneries Ltd. By Its ... vs Estate Of The Late V. Ramalingam ... on 31 October, 1952
Equivalent citations: AIR 1953 MADRAS 694
JUDGMENT Rajamannar, C.J.
1. These two appeals arise out of two suits filed by the appellant, the India Sugar Refineries Ltd., by its director & Managing Agent, T. Padmanabhan, for recovery of sums of money from the estate of one V. Ramalingam, who was a director of the company and also its sole managing agent from 16-11-1933 till the date of his death 18-12-1942. The plaintiff company was incorporated under the Indian Companies Act with the principal object of manufacture of sugar at Hospet. By its memorandum of association, Messrs. Ranganathan & Co., a partnership firm, were appointed managing agents of the company. The firm continued to hold that Office till they resigned that office in or about July 1935. Subsequent to this, an agreement was entered into by the company with V. V. Ramalingam under winch the latter was appointed its sole managing agent on terms set out in the agreement. V. Ramalingam as the managing agent was entitled to receive a salary of Rs. 800 per mensem together with a commission of 7 1/2 per cent per annum on the total net annual income of the company. Besides these, he was also entitled to a commission in respect of work done by him in capacities other than that of a Managing Agent. More detailed reference will be made to the material terms in due course in this judgment.
2. In the two suits out of which these appeals arise, the company claimed various amounts on the ground that Ramalingam had wrongfully been paid those amounts or had drawn those amounts or was otherwise liable to pay the company the amounts which he had received. The learned District Judge of Bellary who tried both the suits dismissed them with costs. There was another suit which was tried along with these two, claiming more or less similar reliefs, and that too was dismissed.
3. In the two appeals, the learned Advocate General who appeared for the appellant company pressed before us only certain items among the several items claimed by the company in the suits originally.
4. (After dealing with certain items claimed in appeals Nos. 766 of 1948 and 767 of 1948, the judgment proceeds as under :--) The last item pressed upon as relates to a sum of Rs. 8510 which is the profit earned by Ramalingam on certain transactions which we shall now mention. The Sugar Control Order came into force in April 1942 and the prices of sugar were fixed both ex-factory and in the open market. What Ramalingam did was, he got himself appointed as a sugar dealer, purchased large quantities of sugar at Rs. 31-15-0 the controlled price ex-factory, and sold it to outsiders at Rs. 32-8-0 the controlled price for outside sales, and pocketed the difference of nine annas per bag. The learned Judge has found on the evidence that the sugar purchased by Ramalingam continued to remain in the company's factory premises and Ramalingam used the company's staff & premises for his own business as a sugar dealer. The ledger folio of Ramalingam in the company's accounts shows that on 13-6-1942 Ramalingam purchased 15128 bags of sugar for over Rs. 4,83,000. But he never paid the amount to the company. His account was debited with this amount. This quantity of sugar which remained in the company's premises was being sold over several days and the amounts fetched by the sales were being credited in his account. The sum of Rs. 8510/- represents the difference between the price at which Ramalingam purchased calculated at Rs. 31-15-0 and the price at which he sold in the market, namely, Rs. 32-8-0. The learned trial Judge observed that he would have had no hesitation in giving the company a decree for this amount on account of the fact that Bamalingam had utilised the office staff for his own business but ultimately dismissed the company's claim on the ground that it was barred by limitation, we agree with the District Judge that the company was entitled to this amount. Therefore, the question of limitation remains to be considered.
5. The learned Judge was inclined to hold that Article 36 or Article 90 would apply. The amount of Rs. 8510 was earned sometime in 1942, and the suit was instituted on 14-12-1945. It was contended by the learned Advocate General that neither Article applies and the proper article to apply was Article 120. Article 36 runs as follows:
"Description of suit Period of limitation Time from which period begins to run For compensation for may maleasance, misfeasance or non-leasance independent of con-tract and not herein specially provided for.
Two years When the malfeasance, allowance, misleasance or non-leasance takes place."
If this Article were to apply, clearly the claim is barred, but in our opinion, it is not the appropriate article. In the first place, it may be mentioned that this article contemplates an action for compensation for a wrong in the nature of a tort. Secondly, the suit to which this article would apply is a suit for compensation. If the suit is for the recovery of a particular property or sum of money as such, then the suit cannot fall within Article 38. In -- 'Raja Kumar v. Fateh Bahadurlal', AIR 1917 Pat 230 (A), dealing with this Article, Atkinson J. of the Patna High Court observed as follows:
"In my opinion, it (Article 36) has no application whatsoever to the present case. We have only to read the terms of the article to see that it is an article referable to damages for some tortious act. This is not a case of damages at all. This is a case in which plaintiff seeks to recover a specific sum of money, her property, which has been applied by the defendant in the action for his own use, benefit and enjoyment."
In -- 'Rajah Khatter Kristo Mitter v. Kumar Binendra Narain Roy', 3 Cal W. N. 202 (B). Maclean C. J. takes the same view of Article 36. The learned Chief Justice says:
"It seems to me that the first answer to the contention that the case comes within that Article (36) is that this is not a suit for compensation in the true acceptation of the term. What compensation, 'qua' compensation does the suit ask for? I received no answer from the appellant's vakil to that question. If it be not for compensation, that alone would be sufficient to exclude the case from the operation of Article 36."
The learned Chief Justice, Leach C. J. in the Full Bench decision in -- 'Subbiah Thevar v. Samiappa Mudaliar', AIR 1938 Mad 353 (C), dealing with this Article observed:
"Article 36 applies to torts not specially provided for ............In the first place, in Article 36 the word 'compensation' is used, which is the appropriate word to apply in connection with a suit to remedy an injury to a person or a person's property."
The learned Chief Justice was dealing with a case of a suit filed against a trustee to make good the loss sustained by the trust by reason of his omission to collect moneys due to the trust. It was held by the Pull Bench that neither Article 36 nor Article 62 applied to the case, but it was Article 120 that applied.
6. An analysis of the nature of the plaintiff's claim for this amount of Rs. 8510/- would clearly show that Article 36 has no application. Obviously, this amount is not claimed as compensation for any tortious act oh the part of Ramalingam. The basis of the company's claim is really to be found in the well known equitable principle now embodied in Section 88 of the Trusts Act, which is as follows:
"Where a trustee, executor, partner, agent, director of a company, legal adviser or other person bound in a fiduciary character to protect the interests of another person, by availing himself of his character, gains for himself any pecuniary advantage, or where any person so bound enters into any dealing under circumstances in which his own interests are, or may be, adverse to those of such other person and thereby gains for himself a pecuniary advantage, he must hold for the benefit of such other person the advantage so gained."
Ramalingam was one of the directors of the company, He was also the sole managing agent. He was bound in a fiduciary character to protect the interests of the company. Here, the finding is that he availed himself of this character and utilised the premises and staff of the company as well as his credit with the company by reason of the position which he occupied and gained for himself a pecuniary advantage in the sum of Rs. 8510. The company now claims that Ramalingam must hold the advantage so gained for the benefit of the company.
7. Article 90 would not in this view of the nature of the claim apply to the case. That Article is the residuary article dealing with claims of a principal against an agent. We are inclined to hold that the neglect or misconduct contemplated by the article is neglect or misconduct in the course of and intimately connected with the agency duties, 'qua' agent. It is in this view that this article has been applied to cases where a principal sues the agent to recover the secret profits made by the agent. In the present case, it would not be accurate to speak of the sum of Rs. 8510 as secret profit made by the agent. It is not as if Ramalingam was appointed an agent of the company to sell at a particular rate and Ramalingam sold at a higher rate and secretly pocketed the difference. As the learned trial Judge observed, it cannot be said that Ramalingam was doing anything 'per se' illegal, to use the language of the learned trial Judge. Ramalingam's actions were all 'intra vires'. To such a case Article 90 would not have application. This is a case where the basis of the claim is not neglect or misconduct, but the advantage taken by a person in a fiduciary capacity of his position to make a gain. The law says that such a person shall not keep that gain to himself but shall give it up to the person to whom he owes a fiduciary duty. To such a suit there is no other article applicable and therefore Article 120 must apply. The decision of the Full Bench of this court in -- 'AIR 1938 Mad 353 (C)', supports us in this view. The suit was filed in 1945 and is well within the time of six years provided by Article 120. We therefore do not agree with tile learned Judge that the claim is barred by limitation. To this extent we allow this appeal and pass a decree in favour of the company for Rs.
8510. From this amount of Rs. 8510 wilt be de ducted a sum of Rs. 2406-1-0 which is the amount debited against Ramalingam towards godown rent.
The decree will bear interest at six per cent per annum from the date of suit. In this appeal, the appellant and the contesting respondents will pay and receive proportionate costs.